On 25 May 2023, The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) announced an increase of the repo rate by 50bps. This is the tenth consecutive increase for South Africans and the highest the interest rate has been since 2009.
The repo rate in South Africa is currently 8.25%.
The prime lending rate is currently 11.75%.
The reason The SARB increases the repo rate is in an attempt to curb inflation. They do this using a method called inflation targeting. Inflation targeting is the way the SARB uses monetary policy tools, such as adjusting the repo rate, to control inflation. Currently the SARB’s inflation target is 3% - 6%, with
According to Dawie Roodt, Economist at Efficient Group, a simple way of explaining inflation is that things are becoming more expensive and your currency (The Rand) is becoming less valuable. In short, the reason the SARB keeps increasing interest rates, is to try and protect the value of the Rand.
According to The SARB’s Governor Lesetja Kganyago, inflation has been shaped primarily by fuel, electricity and food price inflation.
It’s very unlikely that interest rates will go down in 2023. The reason? According to the MPC’s latest announcement, headline inflation is predicted to be 6.2% in 2023, still outside of The SARB’s target. In 2024, it’s predicted to be 5.1% and in 2025, 4.5%.
Watch The South African Reserve Bank’s Governor Lesetja Kganyago full address on 25 May 2023:
The next interest rate decision in South Africa will be when the SARB’s MPC meets on 20 July 2023.
If you find that the latest increase of the repo rate has meant that you are now over-indebted (more than 50% of your salary goes towards paying off your debt), you should consider going under debt review today. By going under debt review, you can get immediate relief from feeling overwhelmed and not being able to keep up with your debt repayments.
When it comes to interest rates, with debt review, our expert Debt Counsellors negotiate with creditors for a reduced interest rate on your loans. These new reduced interest rates remain fixed throughout your debt review process. This means that you will be unaffected by new interest rate hikes.
Don't wait for another interest rate hike to figure out how you will pay for an increased bond and car payment. Remember skipping monthly payments can eventually lead to credit lenders taking legal action against you.
The worst case scenario could be your home or car being repossessed. Protect yourself and your family from this happening. Go under debt review today.